For a New Approach, Maybe We Should Look to the Past

Strange as it may seem, a good idea surfaced in the presidential campaign last week. Democratic candidate Bill Clinton proposed setting up 170 technical centers to work on new ideas for industry, for small business and for retraining the skilled people now being downsized out of defense jobs.

Talk is cheap, of course, and the speeches of both Clinton and President Bush--who Thursday envisioned a $10-trillion economy--are full of promises these days.

But the tech center idea grows from good roots. Its model is the land grant college and agricultural extension system that over the last century has helped make American agriculture peerless in the world.

The country could use something like it today as it suffers losses of good, high-paying jobs in service industries and in aerospace-defense. Purchasing power and consumer confidence are falling. And the worst of it is that no one seems to know what will provide the new jobs to replace those being eliminated.

History accomplished that by fostering knowledge. In 1862, with the Civil War raging, Congress passed a law giving the states federal land that they could sell to raise endowments for colleges that would teach agricultural science and the mechanical arts.

Thus was the technological advance of U.S. agriculture born. The Land Grant Act was augmented a quarter of a century later when the president of Iowa State College came up with the idea of an extension service to get knowledge out to the farmers.

Farming expertise didn’t come naturally to Americans. They were as suspicious of innovation as farmers anywhere. It took colleges such as Cornell and Ohio State to demonstrate how new methods could increase production--and to back up the farmers as they experimented.

As we know, the system worked. The farms prospered--and millions left farming for other work. Between 1910 and 1990, the number of people living on farms fell 85%, from more than 32 million to under 5 million. Yet yearly farm output exploded over those decades, from under $1 billion worth in 1910 to more than $100 billion worth in 1990--in figures adjusted to eliminate the effect of inflation.

The aim of the land grant and agricultural extension system was not job preservation, but growth of knowledge and production. With its help, U.S. farms brought more food less expensively to more people.

The result, in a word, was an increase in productivity. The U.S. economy gained a surplus that helped finance growth in manufacturing, which employed many of the people who left the farms.

There the pattern repeats itself. Manufacturing employment rose to a high point in 1980, at more than 20 million jobs. Since then, the jobs have declined by roughly 2 million, or 10%. But manufacturing output has risen by almost $1 trillion, or 45%, as payrolls have grown by more than one-third. More output, more money for all.

Productivity gains in U.S. manufacturing in the 1980s were the most dramatic in the industrialized world. And the resulting economic surplus, along with advances in computer technology, spawned a surge in service industry jobs, in finance, travel, business and health services.

On top of that, there was a major increase in spending for defense--the government program that has underwritten jobs and technology for the last 50 years. All those forces together made the ‘80s a job-creating decade.

But now we have come to another crossroads. The Cold War is over and defense budgets have begun a long decline. And service industries are restructuring, with widespread layoffs and job eliminations.

As at past turning points, productivity is increasing. Thanks to cost reductions, corporate earnings are rising more than 25% on average, reports Morgan Stanley economist Stephen Roach, who has published significant research on service industry restructuring.

At defense firms too, cash flow grows as cutbacks are made.

But in important ways, past patterns are not repeating themselves. The human toll is heavy in job losses, and Americans are frightened by a persistent recession. But new opportunities are not yet opening up. “Venture capital firms don’t see investment possibilities in shrinking defense firms,” says a California entrepreneur.

Clearly, some kind of program is needed to ease the passage to whatever new industries are to come.

But in an election year, serious talk about programs is hard to come by. Clinton’s tech centers proposal is a line in a campaign speech, not a defined program. And President Bush said in a speech on Thursday that he distrusts industrial policy and would cut taxes and spending to spur the economy. “The clumsy hand of government is no match for the uplifting hand of the marketplace,” said the President.

That may be good campaign rhetoric, but it sidesteps the question of where the economy should turn now that the hand holding billions of defense dollars is being withdrawn.

Hughes Aircraft is cutting 4,500 missile-manufacturing jobs in San Diego, Pomona and Rancho Cucamonga, and transferring work to Tucson where costs on average are 30% cheaper. The marketplace in this case favors Tucson, but that doesn’t provide much uplift in Pomona, San Diego and Cucamonga.

So much for rhetoric. Given the election pressures this fall, intelligent discussion of the economy will have to wait for next year.

But that is where the land grant-agricultural extension model may prove useful. Unlike the massive defense budget, extension programs are decentralized--34% of the agricultural program’s annual budget comes from the federal government and 66% from states, counties and local programs such as 4H. Deans of land grant universities have as much say as the Department of Agriculture.

Rather than a central purchasing authority called the Pentagon, extension programs have about them a sense of Americans putting their heads together to solve problems. And that’s an old idea whose time has certainly come again.